Judge: Michael Shultz, Case: 22CMCV00130, Date: 2022-09-28 Tentative Ruling
Case Number: 22CMCV00130 Hearing Date: September 28, 2022 Dept: A
22CMCV00130 Icure Pharmaceutical, Inc. v. S Ram and M Ram
Resources, et al.
Wednesday, September 28, 2022, at 8:30 a.m.
[TENTATIVE] ORDER GRANTING MOTION TO DISMISS AMENDED COMPLAINT AND
COMPEL ARBITRATION BY DEFENDANT, SRAM & MRAM RESOURCES BERHAD
The
First Amended Complaint alleges that on September 18, 2020, Plaintiff purchased
patient examination gloves (“WNAVI gloves”) from the SRAM Entities. The parties
entered into a second contract on September 27, 2020, for the purchase of Gods
Navi gloves (“GODS gloves”) pursuant to a contract for samples (“Sample
Contract”). Defendants could not fulfill the order under the Sample Contract
and proposed to replace it with WNAVI gloves. Defendants represented that the WNAVI
gloves met FDA regulations for medical-grade gloves. Therefore, Plaintiff
entered into the Main Contract for purchase of WNAVI gloves. However, Plaintiff
alleges that the gloves were non-conforming because they were food-contact
gloves.
The
WNAVI gloves were later transported to non-party D.B. Warehouse (“the
Warehouse”) in Carson. Plaintiff paid for the cost of storage pursuant to
allegedly forged invoices created on the Warehouse’s stationery. According to Plaintiff, Defendants generated,
altered, or manipulated the invoices before sending them to Plaintiff. The
storage was purportedly for Plaintiff’s gloves; however, Plaintiff was unwittingly
paying for Defendants’ storage of Emerald gloves stored at the same warehouse.
Defendants have been unjustly enriched as it has obtained free storage of its
goods at Plaintiff’s expense. Plaintiff
alleges claims for fraud, civil conspiracy, conversion (arising from the
alleged non-conformity of the gloves), and for fraud, breach of contract, and
unjust enrichment (arising from the warehouse storage costs paid by Plaintiff).
II.
ARGUMENTS
A. Moving papers filed August 9, 2022
Defendant, S RAM
& M RAM Resources Berhad (“SRAM Berhad”) seeks an order to dismiss this
action and compel arbitration since the Sales Contracts at issue include a
provision requiring mandatory arbitration of all disputes arising out of the
Sales Contracts. Although SRAM Berhad is not a signatory to the Sales
Contracts, Defendant contends that Plaintiff is equitably estopped from
proceeding with this civil action since Plaintiff’s claims against SRAM Berhad are
intertwined with the underlying contractual obligations.
Alternatively,
Defendant requests an order staying the action pending resolution of an
arbitration proceeding before the International Court of Arbitration of the
International Chamber of Commerce (“ICC Court”) which Plaintiff has already
commenced. Plaintiff expressly waived the right to commence any action in another
court.
B. Opposition filed September 15,
2022
Plaintiff does
not oppose arbitrating the contract claims in the interest of judicial economy,
although SRAM is not a signatory to the contracts. The fraud claims, however,
are not intertwined with the contract claims and are not subject to
arbitration. These claims are based on conduct that occurred in California and
do not relate to the parties’ performance under the Sales Contracts. There is a
separate agreement for storage of Plaintiff’s goods which does not have an
arbitration provision.
C. Reply filed June 22, 2022
The causes of action alleged in the
complaint arise out of the Sales Contracts at issue and fall within the broad
scope of the arbitration provision. The ICC arbitration is ongoing. Plaintiff
has requested joinder of SRAM (moving party) and other defendants. SRAM will
request that the ICC court accept Plaintiff’s request for joinder unlimited to
the contract claims. The alleged improper invoicing and storage charges arise
out of the Sales Contracts. Whether these claims are arbitrable is for the
arbitrator to decide.
III.
LEGAL STANDARDS
The issue is
whether, SRAM Berhad, a non-signatory can compel Plaintiff to arbitration of
any claims asserted against SRAM Berhad.
The court “shall”
compel arbitration if it determines that an agreement to arbitrate the
controversy exists, unless the right to arbitration has been waived, grounds
exist for rescission of the agreement, a party to the arbitration agreement is
also a party to a pending court action and there is a possibility of conflicting
rulings of fact or law, or the petitioner is a state or federally chartered
depository. Code
Civ. Proc., § 1281.2. The FAC alleges that Plaintiff
contracted with SRAM UK for the purchase of the gloves at issue. FAC, ¶¶ 25-26,
31. There is no dispute that both the Sample Contract and the Main Contract
contained a provision requiring mandatory arbitration of “any dispute, controversy, or claim rising [sic] out of or
in connection with this Agreement, including without limitation, any dispute
regarding the enforceability of any provision, which cannot be resolved
through good faith negotiations … .” Declaration of Hemalata Arumugam, ISO Motion, Ex. 1, ¶11.
Defendant has
demonstrated that the determination of whether the claims against SRAM Berhad’s
claims are subject to arbitration is for the ICC to decide. The ICC Rules state:
“
… if any party raises one or more pleas
concerning the existence, validity or scope of the arbitration agreement or
concerning whether all of the claims made in the arbitration may be determined
together in a single arbitration, the arbitration shall proceed and any
question of jurisdiction or of whether the claims may be determined together in
that arbitration shall be decided directly by the arbitral tribunal, unless the
Secretary General refers to the matter to the [ICC] Court for its decision pursuant
to Article 6(4).” Declaration of Briton P. Sparkman ISO Motion, Ex. 1, Art. 6,
¶ 3.
“Any
decision as to the jurisdiction of the arbitral tribunal, except as to parties
or claims with respect to which the [ICC] court decides that the arbitration cannot
proceed, shall then be taken by the arbitral tribunal itself.”” Id., ¶
5.
The arbitrator’s exclusive jurisdiction to decide the issue of
arbitrability of claims in the first instance is supported by case authority
cited in Defendant’s reply holding that “where the existence of an arbitration
contract is admitted or found, it is for arbitrators and not the courts to
resolve any doubts as to its meaning and extent.” Berman v. Renart Sportswear Corp. (1963) 222 Cal.App.2d 385,
388. Where an agreement has “clearly
and unmistakably delegated the question of arbitrability to the arbitrator
under all circumstances,” the enforceability of the arbitration agreement
should be adjudicated in the first instance by an arbitrator and not in court. Mohamed v. Uber Technologies, Inc. (9th Cir. 2016) 848 F.3d
1201, 1208. Moreover, such “clear and
unmistakable evidence … might include a course of conduct demonstrating assent
or an express agreement to do so.” Id.
The arbitration
provision is broadly stated to include “any dispute, controversy, or claim”
arising out of or in connection with Sales Contracts Agreement, “including
without limitation, any dispute regarding the enforceability of any provision.”
Arumugam, ISO Motion, Ex. 1, ¶11. Plaintiff acknowledges that it has submitted
its “Request for Joinder of non-party SRAM & MRAM Technologies and
Resources Limited, (“SRAM CA”), and SRAM Group, defined in the FAC to include
both SRAM Berhad (moving party) and SRAM CA. FAC, 1:24-28; ¶ 15, Declaration of
Jinhee Kim, Ex. D. Plaintiff contends it has requested joinder of claims
regarding the contracts and non-conformity of the gloves only, as encompassed
by the Contracts. Id. ¶ 15. However, this request raises with the
arbitrator the arbitrability of claims alleged against SRAM UK as well as
non-signatories.
Where a party has
signed an arbitration agreement but attempts to avoid arbitration by suing
nonsignatory defendants for claims based on the “same facts” that are
“inherently inseparable from arbitrable claims against signatory defendants,”
that party will be equitably estopped from repudiating the arbitration clause.
Metalclad
Corp. v. Ventana Environmental Organizational Partnership (2003) 109
Cal.App.4th 1705, 1713. The court considers the relationships of the parties, the claims
made, and the issues presented. Specifically, whether the claims that the
nonsignatory sought to arbitrate were “intimately founded in and intertwined
with the underlying contract obligations." Metalclad
Corp. at 1713
Plaintiff’s claims against SRAM UK
are “intertwined” with its claims against SRAM Berhad. The entire transaction
for the purchase of the gloves began with the sales contracts with SRAM UK, who
referred Plaintiff to SRAM Berhad, the exporter of the gloves; Plaintiff later
issued a letter of credit to SRAM Berhad for $1,010,010 for an order of gloves.
FAC ¶ 33.
Plaintiff issued a second letter of
credit of $9.4 million pursuant to the Main Contract to SRAM Berhad. Plaintiff
alleges SRAM Berhad “was responsible for overseeing the manufacturing process
and exporting the Goods from Malaysia to California.” FAC ¶ 35. All bills of
lading for the shipments were allegedly issued by SRAM Berhad. FAC ¶ 36. With
respect to warehousing the goods, Plaintiff agreed with SRAM to move the goods
to D.B. Warehouse, with whom SRAM had a relationship. FAC ¶ 38. “SRAM” refers
to all Defendants as a collective, including SRAM Berhad.
The court “shall,” upon motion of a
party, stay the action or proceeding until an arbitration is had in accordance
with the order to arbitrate or until such earlier time as the court specifies.”
Code Civ.
Proc., § 1281.4
IV. CONCLUSION
Based on the foregoing, Defendant’s
Motion to Compel Arbitration is GRANTED. The court grants Defendant’s
alternative request to stay this matter until the completion of arbitration.
The court sets an OSC re: Completion of Arbitration for _____________________,
at 8:30 a.m. in Department A of the Compton Courthouse.